In the July/August PRSM Magazine, Tips and Trends, Amruta Vantipalli, PRSM Association Industry Program Manager, provides a high-level review of the Retail FM budgeting process using data from a recent survey “Retail Facilities Management Industry Overview.” More than 100 retail organizations participated in the survey, which reflects a combined 135,000 stores with more than 2.3 billion gross square feet equaling over $3.1 billion in annual FM budgets.
Among the challenges in estimating annual expenses – the survey points to evolving organization needs and customer needs, fast changing technologies, sales, etc. Internal budgeting processes, also add unique challenges to the process. Two approaches seem to be prevalent:
- Top-Down Approach: when top management prepares the budget and conveys to the team the performance goals and expectations.
- Bottom-Up Approach: with middle management preparing the budgets and seek approval from top management.
Both have advantages and drawbacks. The Top-Down Approach can sometimes alienate management teams, who find it difficult to balance store needs with upper management’s lack of insight. Although the bottom-up approach gives the opportunity for lower-level managers to drive the budget, and at the same time improve team morale, one drawback to this approach is the time consumed by the team involved in the back-and-forth process.
According to the PRSM survey, about 21% of retailers use a bottom-up approach and arrive at their total budget either by summing up the budget for each store or by summing up the budget for each trade. Typically these retailers have fewer stores and less store area on average compared to the retailers using other approaches.
The survey also revealed that 62 percent of respondents use incremental budgeting due to its simplicity and popularity.
See the complete results for this survey, which explores finance and budgeting as well as a wide variety of other topics, including the FM Business Model used across the industry, maintenance strategy, vendor management, technology and sustainability. Follow this link.